How We’re Trading This Mess: Cash Now, These 3 Big Dividends Later

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Look, I’m as prepared for this sell-off to end as you are. And when stocks fall—spending dividends skyrocket—I so badly Want to back up the truck.

As value-focused dividend investors, buying dips is what we live to do. Sitting in cash is painful for me, because I’m sure it is for you too.

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But the time is not yet. That’s why I recommend only one stock This year my . In reverse earnings report Seva, urging its readers to deposit cash. And after last Thursday’s dumpster caught fire, we sure are glad we did!

We have also lightened our portfolio over the past few months, including taking some decent profits on three bank stocks we sold in May:

There was nothing wrong with all three: they were benefiting from the injection of cash into the Fed’s markets, and the 10-year Treasury (at which they lend to clients) and the Fed’s policy rate (at which they lend). ) difference between each other).

Now that Powell has finished things and the Fed is letting the rate rise, banks’ profit margins are being squeezed, so it was time to bid up. And by doing so we made some decent profits off the table.

Putting the Safety of Your Income (and Nest Egg) First

this is Absolutely The way we trade our dividends Opposite income report. And that’s why I won’t be a prisoner of the old-school investing-newsletter model that says I need to pick up a new one every month. If I thought doing so would put your money at risk — as I think it would be today — I’d do what I was doing: urging readers to hoard cash and build their shopping lists.

When the time comes to deploy that cash, we’ll be ready. I’ll tell you exactly when that moment will come Opposite income report.

Closed-end funds top our list

One of the best things we’ll be very interested in buying when the smoke clears is high-yield closed-end funds (CEFs). these are vehicles Ideal Because they often trade on the open market at different levels (and usually discounts!) than their portfolio’s per share price or net asset values ​​(NAV) in CEF-speak.

CEFs are cheap now, but I expect in a few months they will be even cheaper. Then, when their “discount window” closes (or returns to more normal levels), they will push our CEF prices higher. that would be a very Nice payoff for our patience today, on top of the 7%+ dividends CEFs regularly pay.

Let’s start looking forward to those brighter days by starting our CEF shopping list now.

“Shopping List” CEF No. 1: A Megatrend-Driven 6.3% Dividend

When it comes to CEF investing, we ask for one more thing beyond discounts and dividends: Megatrend! And there is no more predictable megatrend than the aging of the American population. Sure, it’s completely covered by COVID, but it still is—and it’s accelerating.

According to a recent Reuters report, about 16.5% of the US population, or about 5.4 million people, are over 65. By 2040—just 18 years from now—that number will rise to 74 million, an increase of 37%.

This is going to lead directly to higher healthcare spending, and our first “shopping list” is well positioned to benefit: BlackRock Health Sciences Fund (BME), Which gives 6.3% and sports a 2% premium on the NAV which I expect to be taken out in the next few weeks, setting up a nice discount for us. BME large pharma stocks like . also helps reduce our risk by living with johnson and johnson
(JNJ), Pfizer
And Abbvi (ABBV).

In the end, this fund not only pays a high yield but is Increasing Its paid off, too, with the 6.5% increase announced last October. The favorable trends we have set for healthcare are likely to grow further in the years to come.

“Shopping List” CEF No. 2: The Rise of “Rental Nation” 10% Dividend

Sure, housing demand is softening, but with 30-year mortgage rates now around 6%, buying a home is still expensive. This is why many people are having to turn their house hunt into an apartment hunt.

cat now bidding war for apartmentsFor example, in Philadelphia, according to recent reports, renters are offering $500 or more a month from the advertised rent.

One CEF that suits this trend is CBRE Global Real Estate Income Fund (IGR), which devotes 16% of its portfolio to residential REITs, its second largest allocation. sun community
Which has mobile and built-home parks throughout the South, one of its top-10 holdings, as is Invitation Home (INVH), Joe maintains single family homes in the West and Florida.

Both stocks are posting healthy dividend hikes, including a relatively large hike at the end of last year!

We also love IGR’s diversification: Its top-10 holdings include other REITs that offer in-demand properties like sail-tower REITs. Crown Castle International (CCI) and self-storage firms ExtraSpace Storage (EXD) And cubesmart
cube area

IGR’s management team is doing a great job of handing out the increasing rent checks its portfolio companies are depositing to us: it’s not often that you hear about a 10% dividend that’s increasing (especially these days), but the same is happening with IGR:

Receives 10% (monthly) dividend of IGR and is growing rapidly

IGR is a textbook case for why we’re holding off on buying now: despite the market catastrophe, it trades at a 0.85% premium. As with our first pick, I expect the premium to be lifted in the coming weeks, setting up a discount opportunity (and potentially a higher yield).

“Shopping List” CEF No. 3: A 93-Year-Old Fund That’s Seen It All

Tri-Continental (TY) Not a record-breaker for its dividend: It yields a 4.6% yield, well below CEF standards. But given the choice between TY and index funds, I’ll take TY every time.

I’m doing this comparison, by the way, because TY has similar stuff to benchmarks. SPDR S&P 500 ETF Trust (SPY)
Including Apple
(AAPL), Pfizer (PFE), Exxon Mobil (XOM)
And doe
Inc. (dow).
It bundles together this blue-chip stock portfolio for a dividend that is triple the 1.5% SPY payout.

Plus you get a deep discount, which is 12.4% down from an average of 8.3% TY over the past year, and I doubt we’re going to have an opportunity to shop for even less. I Don’t Know About You, But I Want to Get S&P 500 Exposure With Your Higher Return in Dividend Cash And On Discount! Which, by the way, is something that an ETF like SPY never offers!

Finally, we’ll get to a ton of institutional memory with this: TY was launched in 1929, just before the Great Depression, so it tackles everything the economy can throw at it, including rising rates. This is why, unlike most other CEFs, TY uses almost no leverage – only 3% of the portfolio at last check.

Brett Owens is Chief Investment Strategist Contrarian Outlook, For more revenue streams, get your free copy of their latest special report: Your Early Retirement Portfolio: Huge Dividends—Every Month—Forever,

Disclosure: none

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